Savings plans are initiated by the Indian government, public financial institutions or banks. Their interest rates, investment horizons, and tax treatments vary. A saving plan prepares us financially for unforeseen personal and medical emergencies. It helps you to fulfill your personal wishes and those of your family. It helps to complete Additional courses complement your existing qualifications, your child’s higher education, and marriage, etc. What’s more, It’s a disciplined habit for regular savings.
The advantage of saving investments is that they are funded by the government and thus provide absolute security for your invested capital. They are also low in risk while offering good returns. Interest rates for savings plans are usually revised every 3 to 6 months.
The types of savings plans in India can be divided into two types depending on popularity, financial security and return:
- National Certificate of Accreditation (NSC)
- National Savings Plan (NSS)
Best savings schemes in India
Here are the best investment schemes that will ensure that you have sufficient savings for your future financial needs.
- National Savings Certificate (NSC)
The National Savings Certificate is a fixed income investment proposed by the Government of India that can be opened with any post office. This is a bond that is tax efficient for the investor. It is particularly suitable for low and middle-income investors with low-risk appetite. This is similar to other fixed-income investments such as PPF (Public Provident Fund) and post office fixed deposits.
However, a safe and low-risk investment also means that it does not guarantee high returns, especially when the capital market is volatile. You can buy an NSC on your name or have a joint account with another adult or buy it for a minor. However, the government only provides this program to an individual of Indian nationality. As a result, Hindu Undivided Families (HUF) and non-resident Indians (NRI) are not allowed to invest in NSCs.
Key Features and Benefits of the NSC Savings Scheme:
- There are two types, depending on their duration of 5 years and 10 years.
- NSCs have no maximum purchase limit. Investments not exceeding 1.5 lakhs INR, however, give rise to tax advantages under Section 80C of the Income Tax Act 1961.
- The current interest rate for NSC is 7.6% per annum. This interest rate is added to the investment and then paid annually and is a stable source of income.
- You can start with an investment of up to 100 INR and increase the amount as much you want.
- Permitted as collateral by banks and financial institutions as well as security for secured loans.
- Serves as a financial guarantee and support for the nominee in the event of an unexpected death of the investor.
- The entire term value is payable to the investor if the investment fulfills its mandate. However, because TDS payments are applicable to NSC payments, NSC is not fully tax-free.
- Investors are not eligible for a premature withdrawal unless under exceptional circumstances like the sudden death of the investor or legal order from the court.
Also read : Top 5 Investment Plans In India 2019
2. Senior Citizens’ Savings Scheme (SCSS)
The Senior Citizens Savings Program has been specifically designed to meet the specific needs of elderly people in India, meaning those who are at least 60 years old. However, persons aged 55 to 60 who have retired or opted for the Voluntary Pension Scheme (VRS) may qualify for the Senior Citizens Saving Plan, but only when the savings scheme account has been issued within one month of the receipt of their retirement benefits.
Key features and benefits of the Senior Citizens Savings Plan:
- The interest rate for the Senior Citizens Saving Plan is 8.3% quarterly. This amount is payable on each of these days in a financial year – March 31st, June 30th, September 30th, and December 31st. December.
- The tenure of the saving plan is 5 years.
- Investors can make up to a deposit in savings and at a multiple of 1,000 INR.
- The maximum amount may not exceed 15 INR lakhs.
- The account is transferable from one bank or post office to another.
- The savings account may be closed before the end of its term, provided that the investor pays 1.5% of the deposit amount in the first year and 1.0% of the amount in the second year.
- The tenure can be further extended to a maximum of 3 years after the minimum maturity term of 5 years, as per the discretion of the investor. If the investor wishes to withdraw the amount after one year of this extended period, the savings plan account may be closed early without deduction.
- The accumulated interest generates TDS, which is deducted at the source when the interest exceeds INR 10,000 per year.
- The accounts of this savings plan enable investors to receive tax benefits under Section 80C of the Income Tax Act 1961.
- The accumulated interest attracts TDS, deducted at source if the interest exceeds INR 10,000 annually.
- The accounts of this savings scheme enable investors to avail tax deductions under Section 80C of Income Tax Act, 1961.
3. Post Office Savings Scheme
As one of the safest and most reliable savings systems, it is ideal for investors with low-risk appetite. In addition, besides assuring investors of high returns, the process is streamlined, fast and easy. It is accompanied by functions that lead to high investment and saving schemes in India.
The following are the products of Post Office Savings Scheme-
- Post Office Savings Account
- 5 Years Post Office Recurring Deposit Account
- Post Office Time Deposit Account
- Post Office Monthly Income Account Scheme
- Senior Citizens Saving Scheme
- 15 Years Public Provident Fund Account
- National Savings Certificates (NSC)- 5 Years NSC (VIII Issue) and 10 Years NSC (IX Issue)
- Kisan Vikas Patra (KVP)
- Sukanya Samriddhi Account
4. Kisan Vikas Patra (KVP)
Kisan Vikas Patra (KVP), launched in 1988, is one of the most preferred savings systems for the Indian postal service. After its first phenomenal success, this savings scheme was discontinued in 2011 as a result of its misuse. It was reintroduced in 2014 after high demand.
Key Features and Benefits of the KVP Savings Plan:
- What attracts the applicant to this savings scheme is that the principal amount doubles in 118 months (9 years and 10 months) at an interest rate of 7.3%.
- This is available in multiples of INR 1,000, INR 5,000, INR 10,000 and INR 50,000. With INR 1,000 being the minimum purchase value. There is no upper limit.
- It can be redeemed prematurely 2½ years after the date of issue.
- The savings plan account can be transferred from one bank or post office to another and from one person to another.
5. Public Provident Fund (PPF)
This system was introduced in 1968 by the National Savings Institute, which is under the Indian Ministry of Finance. It is an effective saving implement, especially for tax savings.
Key Features and Benefits of the PPF Savings Plan:
- Attracts an interest rate of 7.6% per annum, which is then compounded annually.
- Applies to a minimum annual investment of INR 500 and a maximum of
- Payable in the form of a lump sum or up to 12 deposits per financial year.
- The term varies from a minimum of 15 years to the financial year and may be extended to a maximum of 5 years at the discretion of the investor.
- Provides more flexibility as it can be moved from one post office or bank to another.
- Does not apply to joint accounts.
- Investors may claim the tax deductions in para. 80C of the Information Technology Act of 1961. In addition, the accrued interest is completely tax-free.
- Accumulated savings deposits are accepted by banks and financial institutions as security and collateral during loan application from the third financial year.
6. Mutual funds:
Mutual Funds in India are governed by the Securities Exchange Board of India (Mutual Fund) Regulations 1996 with the exception of Unit Trust of India (UTI) as it was created by the UTI Act passed by the Parliament of India. All mutual funds must be registered with SEBI.
You can also invest in mutual funds if you want to explore and profit from stocks and debt. This allows you to balance risk and return according to preference. An investment in the stock market via mutual funds is a safer option than a direct investment in the stock market. You might want to consider a systematic investment plan (SIP), which is one of the best ways to invest in small mutual investments in mutual funds. This will give you better returns compared to other investment options.
7. Equity Savings Plan (ELSS)
As the name implies, this mutual fund helps you invest your shares. ELSSs are tax-efficient mutual funds that allow a deduction of up to Rs. 1,50,000 under Section 80C. The locking period is 3 years. Investing in ELSS can generate higher returns as all investments are made on the stock market, which can help you defeat inflation. However, investing in equities always involves a risk. An investment in ELSS can be made from Rs 500 with no cap on investment in these funds.
Q. How do I create a savings plan?
Answer: Your savings plan depends on various factors like your occupation, section of the society you belong to, gender, etc. Here is the list of the most popular savings plans that you can consider depending on your financial goals. and other parameters:
- National savings plan
- National savings certificate
- Public Provision Fund
- Postal Savings Plan
- Senior savings plan
- Kisan Vikas Patra
- Sukanya Samriddhi Yojana
- Atal Pension Yojana
- Employees Provident Fund
- Pension system of the nation
- Voluntary retirement fund
- Deposit system for retired government employees
- Pradhan Matri Jan Dhan Yojana
Q. Which bank is best for saving account in India?
Answer: The following are some of the leading Indian banks for savings accounts based on their services, accessibility, etc.:
- State Bank of India or SBI
- Axis Bank
- Yes Bank
- Kotak Mahindra Bank
- HDFC Bank
- Bank of India
- RBL Bank
- ICICI Bank
- Canara Bank
Q. Which is best saving scheme in India?
Answer: The best savings schemes often vary based on individual investment objectives, investment horizon, interest rates, risk appetite, expected returns, etc. However, these savings schemes are beneficial for most Indian citizens:
- Fixed Deposit (FD)
- Public Provident Fund (PPF)
- Unit Linked Investment Plan (ULIP)
- National Savings Certificate (NSC)
- Mutual Funds
- Equity Linked Savings Schemes (ELSS)
Q. Is the PPF better than the ELSS? (PPF VS ELSS)
Answer: PPF (Public Provident Fund) and ELSS (Equity-Linked Savings Schemes) are effective tax-saving implement that you can invest in depending on your financial goals, your investment horizon, your investment horizon and your investment objective, and your risk appetite. An important point to consider would be the possibility of early withdrawal (premature withdrawal). You can only withdraw 50% of the accumulated amount from your PPF account after the expiry of the five-year lock-in period. With ELSS, however, you will have a full withdrawal at the end of the three-year term. This will give you more liquidity and more flexibility for future investment.
Unlike PPF, ELSS does not guarantee a fixed interest rate. It is, therefore, better for investors with a relatively high-risk appetite. However, ELSS offers better long-term returns as it involves higher risks.